Question Period Note: Strengthening Supply Chains to Support Economic Recovery

How is the Government of Canada ensuring that supply chains are strengthened to support economic recovery following the pandemic?

• The Government of Canada is monitoring signs of strain in critical supply chains and infrastructure as the economy recovers.
• The government is also working closely with the United States and global partners to enhance supply chain security for key commodities such as critical minerals, batteries and semiconductors, and sectors like life sciences, manufacturing, transportation and defence.
• The government will continue to strengthen the country’s supply chains and ensure the timely movement of goods and materials, while building a more resilient economy.

• It is imperative that the Government of Canada and the private sector work together to shape the country’s long-term supply chain strategies.

• The government is engaging Canadian businesses to understand their opportunities and challenges, and support them in developing strategies to address potential future disruptions, such as supply and procurement diversification.

• As the last 20 months have demonstrated, Canada’s manufacturing base is instrumental in responding to supply chain disruptions.

• The government will continue to work with industry partners to address labour shortages and skill gaps, particularly in skilled trades. Increasing workforce participation by underrepresented groups will help expand workforce capacity and fill supply chain gaps.

• The government will also take stock of critical domestic manufacturing and supply capabilities which will inform its approach to growth and security coming out of the pandemic.

Prior to the COVID pandemic, the world economy experienced periods of intense and rapid globalization.

Beginning around 2008, several important new dynamics in geopolitics and the global economy began factoring into trade. The rise of protectionism, political volatility stemming from income inequality, and trade dynamics between China and the United States, and China and the rest of the world indicated there was decline in world trade growth.

The COVID-19 pandemic has resulted in disruptions in production and shipping across a number of commodities and manufactured products, drastically impacting global supply chains and resulting in shortages across a number of critical sectors. COVID-19, unfortunately, also accelerated the movement by many nations to further advance protectionist measures. The causes of supply chain disruptions during the pandemic are varied and factors affecting shortages are often unique to each commodity or industrial sector. The combined facets of supply chain shortages and disruptions are contributing to inflationary pressures in some commodities or manufactured goods. While the International Monetary Fund has forecast growth for Canada, it will be restrained, in part by supply chain issues, where demand continues to outstrip supply in some areas.

The current supply chains situation builds on strains that were present in the Canadian economy before the onset of the COVID-19 pandemic. Most notably, vulnerabilities in rail as experienced during blockades of early 2020 impacted manufacturing industries, retailers and consumers. Further, Canada’s reliance on Asian imports in areas such as active pharmaceutical ingredients and critical minerals and rare earth elements, has brought to the fore structural issues Canada faces, demonstrating the need to diversify supply and trade bases. Labour shortages and skills gaps have also been identified by industry as persistent issues and, if not addressed, will limit Canada’s ability to pivot to increasing domestic manufacturing capacity and attract foreign investment.

The pandemic is expected to persist for several more years. Canada’s approach to supply chains will require new analysis to inform the measures that could be taken to mitigate possible additional economic and supply chains shocks, and to identify priority areas for Canada to build new or additional domestic manufacturing capacity to serve foreign and domestic markets.

The Government of Canada is pursuing actions to respond to the current situation, and to build stronger supply chains to support future economic resiliency.

Under the Roadmap for a Renewed US-Canada Partnership, Canada and the US have identified several sectors and issues to focus on to foster economic recovery and joint economic security. Coordinated by GAC and ISED, a number of departments are developing projects to advance supply chain resiliency in critical minerals, electric vehicles, semiconductors, life sciences, defence, regulatory cooperation and transportation. Canada is also working towards communicating its position as a secure and reliable source for supply inputs, seeking greater regulatory cooperation to encourage alignment in industrial and trade policies, and advocating for open trade. These initiatives will lay the groundwork for building stronger supply chains that can support Canada’s economic recovery.